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The ACIT, Ahmedabad Circle-3, Ahmedabad Versus Anagram Capital Ltd. and Edelweiss Financial Advisors Ltd. Versus The ACIT, Ahmedabad Circle-3, Ahmedabad

2015 (11) TMI 640 - ITAT AHMEDABAD

Disallowance of NSE penalty expenses - CIT(A) deleted the addition - Held that:- Payment is towards compensation for delayed submission of compliance report to NSE and that too which is not an offence or towards infraction of law. It view of aforesaid facts, ratio of aforesaid decision relied upon by AO is not applicable to the facts of case of appellant. The case of appellant is squarely covered by decision of Crest Capital Market vs. ITO [2009 (1) TMI 553 - ITAT, MUMBAI] and respectfully follo .....

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- CIT(A) restricted part addition - Held that:- Since the Rule-8D of I.T.Rules, 1962 is not applicable, therefore in our considered view the AO was not justified in applying the Rule 8D for making disallowance. The ld.CIT(A) has given a finding that the assessee was having substantial funds and lesser borrowed funds. This finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record, therefore, we do not see any reason to interfere with the finding of the .....

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-2015 - SHRI KUL BHARAT, JUDICIAL MEMBER And SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Revenue : Shri R.P.Maurya, Sr.DR For The Assessee : Shri P.M. Mehta, AR ORDER PER SHRI KUL BHARAT, JUDICIAL MEMBER : The Revenue and the Assessee have challenged the order of the Ld.Commissioner of Income Tax(Appeals)-Gandhinagar CIT(A) in short] dated 31/01/2011 by filing the appeal and Cross Objection respectively pertaining to Assessment Year (AY) 2006-07. 2. First, we take up the Revenue s appeal in ITA .....

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de u/s.14A of the Act towards interest and other administrative expenses. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above, since the assessee has failed to disclose his true income. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the AO be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessa .....

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owance of Excess depreciation of ₹ 25,23,437/- and disallowance by invoking provisions of section 14A of the Act of ₹ 44,42,330/-. Hence, the AO computed total income of ₹ 8,29,48,340/- as against the income declared by the assessee of ₹ 7,30,51,672/-. The assessee being aggrieved by the assessment order, preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee partly allowed the appeal. The ld.CIT(A) while partly allowing the appeal .....

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u/s.14A of the Act to the extent of ₹ 6 lacs. Aggrieved by the order of the ld.CIT(A), the Revenue is now in appeal before us. 3. First ground of this appeal is against the deletion of addition of ₹ 2,38,675/-. The ld.Sr.DR supported the order of the AO and submitted that the ld.CIT(A) was not justified in deleting the addition(s). He submitted that the expenditure was claimed by the assessee as a penalty levied by NSE. 3.1. On the contrary, ld.counsel for the assessee supported the .....

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y considered the Assessment Order and submission made by the appellant. The appellant has made payment of penalty to NSE for violation of its rules and regulations. What is provided under the Explanation - 37 (1) is that any person who violates any law of the land or who commits an offence which is prohibited by law, expenditure incurred in connection with this violation of law are not allowable. The penalty payment to NSE cannot be termed as violation of law. With regards to the decision of Haj .....

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f FERA provisions. In the case of appellant, payment is towards compensation for delayed submission of compliance report to NSE and that too which is not an offence or towards infraction of law. It view of aforesaid facts, ratio of aforesaid decision relied upon by AO is not applicable to the facts of case of appellant. The case of appellant is squarely covered by decision of Hon ble Mumbai I.T.A.T. in case of Crest Capital Market vs. ITO referred supra and respectfully following said order, add .....

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), same is hereby upheld. Thus, this ground of Revenue s appeal is rejected. 5. Second ground of this appeal is against the deletion of addition of ₹ 1,82,398/- made on account of disallowance of interest. The ld.Sr.DR supported the order of the AO and submitted that the ld.CIT(A) was not justified in deleting the addition. The ld.Sr.DR submitted that the AO has given a finding on fact that the assessee has given advances to associated-concern on which no interest has been charged, whereas .....

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val submissions, perused the material available on record and gone through the orders of the authorities below. The Revenue has not pointed out as to how the facts are different in the assessment year under appeal. Therefore, taking a consistent view, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue s appeal is rejected. 7. Third ground of this appeal is against restricting the addition to ₹ 6 lacs out of total addit .....

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able. He submitted that the interest income of ₹ 6.29 crores is more than the total interest outgo of ₹ 4.50 crores and, thus, there is net interest income of ₹ 1.79 crores. Therefore, it cannot be said that the assessee has claimed any expenditure on interest. He submitted that this is so because in assessee s case there is a common pool of interest income and interest outgo. Therefore, netting of interest is required in the light of judgement of Hon ble Apex Court in the case .....

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ispute with regard to the fact that the Rule-8D is not applicable in the year under appeal. The ld.CIT(A) has decided this issue by observing as under:- 7.2 I have carefully considered the submission made by appellant and observation made by the Assessing Officer. I follow the decision of Hon'ble Mumbai High Court in the case of Godrej & Boyce Mfg. Co. Ltd that Rule 8D is not applicable for AY 2007-08. However, the expenses which are incurred in relation to earning such income were still .....

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s. b) It is a fact that the assessee has substantial own funds and lesser borrowed funds. Although theoretically the investments in the present year could be claimed to be made from own funds, but the possibility of borrowed funds being used for the purpose cannot be categorically ruled out. c) The assessee had total 6.29 crores as interest income (1.40 crores from FDR and 4.88 crores from delayed payments received from clients of business); and against this the assessee had total interest expen .....

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and 2.20 crores paid to bank is mainly related to payment for depositing margin money's which has been more than offset by interest income from clients. The remaining interest can be said to be possibly paid for partly business assets and partly for investments, that too which have not been met from own funds. In totality of circumstances, particularly looking at huge own funds and surplus interest income; and in absence of proof that borrowed funds have at all not been used for making inve .....

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₹ 4,00,000/- from interest expenditure nd ₹ 2,00,000 from other administrative expenses and the ground of appeal is partly allowed. 8.1. Since the Rule-8D of I.T.Rules, 1962 is not applicable, therefore in our considered view the AO was not justified in applying the Rule 8D for making disallowance. The ld.CIT(A) has given a finding that the assessee was having substantial funds and lesser borrowed funds. This finding of the ld.CIT(A) is not controverted by the Revenue by placing any .....

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ee has raised following grounds in its cross-objection:- 1. On the facts and in the circumstances of the case, the CIT(A) erred in confirming disallowance of excess depreciation on VSAT by holding that it was not entitled to depreciation @ 60% which is available for computers. 2. On the facts and in the circumstances of the case, the CIT(A) erred in holding that it was a fit case for effecting some disallowance u/s.14A and has further erred in quantifying such disallowance in a sum of ₹ 6, .....

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.2 is against restricting the disallowance to the extent of ₹ 6 lacs by invoking the provisions of section 14A of the Act. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justifieid in restricting the disallowance. The ld.counsel for the assessee reiterated the submissions as were made in ITA No.1181/Ahd/2011-Revenue s appeal(supra). The ld.counsel for the assessee submitted that for applying the provisions of section 14A of the Act, it has been repeatedly held that th .....

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kers (P) Ltd. reported at (2009) 310 ITR 21 (Bom.). Further, ld.counsel for the assessee submitted that wherever expense incurred has no relationship with income not includible in total income, there cannot be any occasion to invoke disallowance u/s.14A, therefore, it is for AO to identify the expenditure which can be reasonably said to have been incurred to earn a tax exempt income before invoking disallowance u/s.14A. Reliance is placed on the decision of the Coordinate Bench in the case of Dr .....

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mpulse (India) (P) Ltd. vs. Asstt.CIT reported at (2008) 22 SOT 368 (Delhi Tribunal). Further, ld.counsel for the assessee placed reliance on the decision of Coordinate Bench in the case of Asst.CIT vs. Eicher Ltd. reported at (2006) 101 TTJ (Delhi) 369. 13.1. On the contrary, ld.Sr.DR supported the order of the AO. 14. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the decisions/judgements relied upon .....

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essee was having considerable surplus own-money, net interest income rather than expense, but no direct nexus provable one way or the other; can best be an estimate. He further concluded that ₹ 1.88 crores paid to clients of business is wholly and ₹ 2.20 crores paid to bank is mainly related to payment for depositing margin money s which has been more than offset by interest income from clients. The remaining interest can be said to be possibly paid for partly business assets and par .....

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